CaseAnalysis:ApolloHealthandLifestyleLimited:RetailFranchisingintheHealthcareIndustry

CaseAnalysis1:Dr.PiyushSinhaThiscasedealswiththeconceptsandissuesthatthefranchiseesarefacing.Themaindifferencebetweenthefranchiseeanddealershipliesinfocusofprocessagainstproduct.Thefirstissueofdecisionofentryinafranchiseeischaracterizedbythethumbruleof2+3.Inthebeginning,thecompanymustrun2oftheoutletsonitsownbeforefranchising3ofitsnewoutletstodemonstrateagoodqualityservicedelivery.Anotherissuecomeswhenwedeterminethemarketpotentialandsize.However,therearesomanypotholeswhenitcomestoestimatepotentialusingclassicalmethods.TheunprecedentedgrowthrateofIndianmarketaswellaslevelofdetailedinformationavailablefortradingareasisalwaysmiscalculated.Severalattitudinal,bothaffectiveandcognitive,factorscreateagapbetweenintentionandactualpurchase.Itiscommonlyperceivedthatinhighlypotentmarkets,companiestendtotakealeapbasedononlydemographicinformationandignorethelifestyleandattitudinalfactors.Issuethatthecompanywillsustainornotinthelongruncanbesortedoutwithtimelyandconsistentdeliveriesofthepromisesmadeintheclinics.Aftermarketestimation,itneedstohavetheproperresources,processesandsystemsforharnessingthepotential.Inthecasestudy,Apollodoesn’thavefinancerelatedissues,buttheknowledgeofrunningahospitalmaybetrickyinrunningaclinicasthetargetcustomerbaseisentirelydifferent.Insuchacase,Apolloshouldunderstandthatfranchisingisabottomupbusinessandmacrostrategymaynotworkhere.Theyshouldratherfocusonclinicperclinicoperationsanddeterminecustomervalue-basedmarketsegmentsandthendevisedeliverymechanismaccordingly.

CaseAnalysis2:RCNatarajanMrNatarajananalysesthecaseonthebasisoffeasibilityofApollo’sforayintotheprimaryandpreventivehealthcare.AsApolloisachainofsuperspecialtyhospitals,thecostofexpansionisquitehigh.Thereisaneedinthecountryformoreoutletsforprimaryandpreventivehealthcare,whichwillenhancethelifeexpectancyaswellaslessentheburdenoffthetertiaryhealthcaresector.ThiswillalsoenhancethebrandimageofApolloandmakeitthefirstchoiceinthesecondaryandtertiarysectors.AlthoughtherewillbealittlecannibalizationofOPDpatientsofApollohospitals,otherplayerswontmatchwithAHLLduetoitseconomiesofscaleandeconomicsofscope,inthelongrun.ThegrowthmodelisAHLListhroughtheincreasedvolumes(customers),ratherthanincreasedmarginsandthusitisgettingdifficultforittobreakevenearly.Thegestationperiodof4yearsishugeforafranchisee.IthastoassumeitsinitiallossesasinvestmentforpopularizingAHLLinthelocalmarketandkeepitsfocusonlong-termreturns.Twomoreaspectsaffectionthefranchiseeagreementistheinitiallicensefeeandtheroyalty.ThelicensefeeofRs20lakhseemstobeonamuchhighersidewhiletheroyaltyof55irrespectiveoftheprofitabilityofthefirmseemstospoiltherelationship.ThetechnicalsupportbyvisitsofdoctorsfromApolloHospitalsseemsmoreofamonitoringworkratherthanasupportinfunctioning.Onasimilarnote,themarketingcommunicationfrontisequallynon-effectivesofar.AHLLstrivestopositionitselfasaonestopvalue-for-money

primaryhealthcarefacility.But,bothitscoreadcampaigns,“Lifemustbegood”and“Andyouthoughtwe’reexpensive”failtoenhancethecoremessageofthecompanyandseemprettyordinaryamidsttheplethoraofadvertisementsoflifestyleproducts.Rightnow,anumberofthingsneedtobemodified.TheinitiallicensefeeshouldbereducedtoRs10lakhandtheroyaltyshouldbepeggedtoPBTandnottothegrossincome,anditshouldbeintherangeof20-30percent.Itshouldalsodeputetheirdoctorstotheclinicsfortimelycheckup.

CaseAnalysis3:MNTripathyHere,theproblemisofmisinterpretationofthemeaningoftheword“franchisee”,whichledtoaexecutablebusinessideafailingmiserably.ThosedisappointmentofthefranchiseeplanstemsstartingwiththecenterComprehensionfromclaiming‘branding’Also‘brandquality.’SomeplaceAnbefuddleaboutdesiresbetweenAHLLandthefranchiseesoveruponwhatamountofthebrandisworthwillbeirritatingthecost-benefitmathematicalstatementtobothofthem.AHLLclearlysupposesthatthoseApollofacilitymarkmaybeworthRs20lakhSimilarlyasAnone-timeauthorizingexpenseandacknowledgesthe5%chargeaheadincomeLikewiseantwelve-monthfee,payablequarterly,Similarlyasreasonable.ThefranchiseeshopethattheApollobrandnamemightnaturallygetthosepatientsinFurthermoretheymighthavethecapacitywithrunaprofitableoperationgoodfromthebegin.Unfortunately,intheadministrationindustry,agreateramountalongtheselinesinthesocialinsuranceindustry,itmaybenotenoughshouldneedahighestpointclassproduct;itmustachancetobedependablysupportedbyahighestpointpopulationadministration.Amoresensiblepicturecouldbegivenwithsomewhatmorepreservationistevaluationsofrevenueandaprojectionofamisfortunefortheinitialtwoyearsbeforebenefitsaremade.Thiswouldtemperdownthedesiresofthefranchiseeandmaybeadditionallydiminishthequantityofutilizationsforestablishments,withconcomitantsparingoftimeforshort-postingtheimminentcandidates.Therefore,sometransformsrequirewithbeconstructed.Secureanothermarktothose‘ApolloClinic,’disassociatingitselfstartingwiththoseApollolineage,yetmaintainingtheaggregationcharacterfurthermoreitspropositionshouldbeAn‘value’markforyearningwhitecollarclassclients.

CaseAnalysis4:NarsimhanRajkumarMrRajkumarassertsthatservicemanagemententailsthreeintricatelylinkedissues:serviceoperationsmanagement;servicemarketingmanagement,andserviceprovidermanagement.Thecoreofalltheseissuesistheheterogeneitywhichmeansboththeemployeesandthecustomersareinvolvedintheservicequality.Ononehand,variabilityintheservicewillleadtohighcustomersatisfaction,ontheotherhandthiswillbrandthefranchiseeinitsownuniquewaymakingitsomewhatbiggerthanthebranditself.TheproblemApollofacesisingivingadifferentbrandimagetobothApolloHospitalsandAHLL.Anyservicecanbeseenontwoparameters—Divergence(theamountoffreedomallowedtotheserviceprovider)andComplexity(thenumberofpredefinedstepstakentoprovidetheservice).Therefore,onewaytoresolveitscurrentissueswouldbetoreducethenumberoffrontsitisfocusingonlikeconsultancy.One

morewouldbetoinvestheavilyinITinfrastructure,whichwouldhelptheprovidingvaluetopatientsaswellasinprocessstandardarisation.

CaseAnalysis5:SanalKumarVelayudhanTherevenuefromroyaltyforAHLLis48percentoftheprojectedrevenueofRs7.89crore.Asroyaltypaidisafixedpercentageoffranchiseerevenue,therevenueofthefranchiseealsodiminishesandsodotheinterestlevelofexistingfranchiseesandthewillingnesstoinvestbybusinessmen.Thus,educatingcustomersisnecessaryforthesefranchiseestomakemoreprofit.

Communicationshouldrelyonsomewhatpaidadvertisingalso,apartfromthewordofmouthpublicity.Thereachintier2and3citiesandtownsshouldbeincreasedleveragingthefranchiseemodel.Personalsellingeffortisrequiredparticularlyintheinitialstage.AHLLneedstoputresourcesintobrandbuildingforpickingupcon-fidenceofthefranchisees.Thefranchiseeonbuildupingthebusinesshasfaithfulclientsfulfilledbythenatureofadministration.Hemightthenunderstandthatthefranchisorisnotgivingqualitytotheeminencepaidonarepeatringpremise.